November 12, 2019

Thanks Pauline but cool your jets


The South Australian Dairy Association (SADA) expresses its thanks to Senator Pauline Hanson for her concerns regarding the dairy industry in Australia by recommending a floor price however, her concern if enacted, would do more harm than good to dairy in Australia.

Ms Hanson’s approach would have the effect of increasing prices for Australian milk opening Australia even further to imported milk products and cheese. New Zealand produces substantially more milk than Australia and it is not inconceivable that a floor price would even open up Australian markets to imported drinking milk from New Zealand.

Much work has been done in Australia to gain access to other markets for Australian exports. By way of example China is Australia’s largest market for dairy exports, which was worth $905 million in 2017 and growing. Australia’s main competitors are New Zealand, the EU and the US.

The China Australia Free Trade Agreement or ChAFTA is closing the competitiveness gap with New Zealand. Tariffs will be progressively eliminated across all Australian dairy products. Notably, New Zealand’s FTA with China contains restrictive safeguard measures on a wide range of dairy products, including liquid milk, cheese, butter and all milk powders (where China raises the tariff back to the higher normal rate when New Zealand exports exceed a certain volume).

By contrast, under ChAFTA, Australia only faces a discretionary safeguard on whole milk powders, with the safeguard trigger volume set well above 2017 trade levels and indexed to grow annually. For all other dairy products under ChAFTA Australia will receive unlimited preferential access. Given time the advantages of ChAFTA will tend to favour Australia.

Key outcomes under ChAFTA included:

  • Elimination of the 15 per cent tariff on infant formula on 1 January 2019
  • Elimination of the 10 to 19 per cent tariff on ice cream, lactose, casein and milk albumins on 1 January 2019
  • Elimination of the 15 per cent tariff on liquid milk by 1 January 2024
  • Elimination of the 10 to 15 per cent tariff on cheese, butter and yogurt by 1 January 2024
  • Elimination of the 10 per cent tariff on milk powders by 1 January 2026.

The effect of a protected Australian market would be to invite China to respond by restoring their tariff walls and retarding access to an increasingly lucrative market for Australian farmers.

The proposed bill is unlikely to deliver any benefit to the parts of the industry that the Senator seeks to protect as a floor price could only be applied generally. Cost of production changes depending on geographic location and with a reduced demand, production would be centered on low cost regions such as Tasmania and Victoria.

“SADA has developed the South Australian Dairy Industry Action Plan 2019-2024 which seeks to capitalise on the opportunities for the SA industry to grow into the premium export space. SADA, processors and the SA Government are bringing a Dairy summit together this week to explore what can be done to advance the premium SA dairy product. A floor price of the nature proposed by Ms Hanson would threaten years of work by SADA and many in the dairy industry in making SA and Australian dairy products internationally competitive.”, SADA CEO Andrew Curtis said today.